2 States Put A Shine On The Rust Belt

New life is stirring in the industrial wreckage of America`s Rust Belt. But exactly what`s happening depends on where you are.

Massachusetts and Michigan are typical of the rebirth of American industry, if only because they`re so different.

In Massachusetts, ``it`s a matter of high-tech replacing traditional industry, instead of using high-tech to maintain traditional industry,`` says Lynn Browne, economist at the Federal Reserve Bank of Boston.

In Michigan, it`s the opposite. ``For better or for worse, Michigan remains essentially an automotive state,`` says Jack Russell of the governor`s office in Lansing.

Involvement by Massachusetts government has been marginal; in Michigan, it seems to have been crucial.

But both states rely on education, particularly their world-class universities.

``We had no choice,`` said James M. Howell, chief economist of the Bank of Boston. ``Our only assets are rocks and education.``

And in both, worker training and retraining are vital.

``Here and in the Midwest, there no longer are opportunities for people with limited or narrow skills to make $25,000 per year,`` Browne said.

Massachusetts

This is a summer of discontent for Massachusetts` famous high-tech electronics industries. There have been 1,600 workers laid off at Wang Laboratories, 1,400 at Data General and smaller layoffs at smaller companies. In an economy poised on a computer chip, this sounds like disaster. But it isn`t. Unemployment is 3.7 percent, the lowest of any manufacturing state in the nation, and falling.

In short, high-tech is important to Massachusetts but not all-important, a sign of strength in a state that often is a bellwether for the industrial future of the Rust Belt.

The high-tech firms--those that make computers, communications equipment or electronic components--employ only 9 percent of Massachusetts` 3 million workers.

``It is a small and integral part of a much larger system,`` said Prof. David Birch of the Massachusetts Institute of Technology. ``It creates relatively few jobs in and of itself. But . . . its small employment base provides the essential components upon which the rest of the economy is based.``

Massachusetts` fabled high-tech industries are mature, said James M. Howell, chief economist of the Bank of Boston. But they have vitalized the rest of the economy in industry, medicine, finance and services, and these other businesses are carrying the load while the high-tech companies send jobs overseas, Howell said. (The same thing is happening in California`s Silicon Valley, where recent high-tech layoffs have not kept the overall unemployment rate for Santa Clara County from falling to 4.8 percent.)

The rest of the Rust Belt often sees Massachusetts as a busy land of white-coated technicians who owe their prosperity to the chip. The reality is less exotic and, for the Midwest, more instructive.

Another MIT economist, Bennett Harrison, argues that two-thirds of Massachusetts` job growth stems from the state`s success in landing federal defense contracts. Statistics bear him out. High-tech and unemployment grew during Pentagon cutbacks of the post-Vietnam 1970s; the falling unemployment of the 1980s coincided with increased defense budgets.

MIT`s Birch said not high-tech but innovation is ``the strength of our economy.`` Birch said the nonstop creation of new, small firms, many finding new ways to do old chores such as packaging food or delivering mail, is more than offsetting the decline of the big high-tech companies.

Howell, in turn, said this innovative climate depends on first-rate higher education, research labs, a go-go entrepreneurial spirit, banks and venture capitalists willing to bet on new ideas and skilled but relatively low-cost labor.

California, Texas and Massachusetts, which all have high-tech industries, ``are just plain crazy states,`` Howell said. ``These are societies that reward deviant behavior and risk-taking. It never occurs to them to penalize failure. Your society (the Midwest) rewards sameness.``

Harrison said that California, Texas and Massachusetts also get most of the military contracts and, not coincidentally, have produced presidents in the last 25 years.

Howell and others celebrate the links between business and universities, especially MIT, which encourages its professors and researchers to spend 20 percent of their time in the commercial economy.

Everyone agrees that, too often, there is less to a high-tech boom than meets the eye.

Despite efforts by the state government, most of Massachusetts`

industrial prosperity is confined to a triangle linking Boston, Worcester and Lowell. In this triangle, unemployment is about 3 percent: outside it, joblessness is 10 percent in many towns.